Whether seized document is incriminating or not is definitely a findings of fact – High Court
In a recent judgment, High Court has held that whether seized document is incriminating or not is definitely a findings of fact. Hard disk was not incriminating documents as its contents were duly verifiable from books and secretarial records – High Court
ABCAUS Case Law Citation:
ABCAUS 3987 (2024) (04) HC
Important Case Laws relied upon:
Principal Commissioner of Income Tax -Vs- Abhisar Buildwell Private Limited, 2023 SCC OnLine SC 481
Karnataka Board of Wakf -Vs- Anjuman- E Ismail Madris-Un-Niswan (1999) 6 SCC 343
In the instant case, the Income Tax Department had filed income tax appeals challenging the judgment/order passed by the Income Tax Appellate Tribunal (ITAT/Tribunal) in holding that the seized document (computer hard drive) did not constitute ‘incriminating material’.
The Tribunal had held that the documents seized during the search proceedings being the Hard Drive did not constitute incriminating material and thus reassessment under Sections 153A and 153C of the Income Tax Act, 1961 (the Act) was legally impermissible for the unabated/completed assessments for the relevant accounting years, is absolutely unjustified and illegal.
The Revenue contended that is order of the ITAT was absolutely illegal and unjustified. It was urged that the AO was correct in eyes of law to reassess the unabated/completed assessments and to make addition in the undisclosed income of the assessee on basis of the highly incriminating material, i.e. Hard drive, for the relevant accounting years and, therefore, the appeals deserve to be admitted on the substantial questions of law as proposed.
On the contrary, the respondent assessee contended that whether the seized document relied upon by the Assessing Officer for justifying the reassessment under Section 153A and the additions made under Section 68 of the Act constituted incriminating material or not, is purely a question of fact. That the appeals did not involve any question of law much less a substantial question of law and hence, the same did not merit admission.
The Hon’ble High Court observed that in view of the decision of the Hon’ble Supreme Court, it is now settled beyond doubt that the Assessing Officer should have unearthed “incriminating material” during the search under Section 132 or 132A of the Income Tax Act so as to justify assumption of jurisdiction to assess or re-assess under Section 153A of the Income Tax Act and make addition to income of the assessee in respect of completed/unabated assessment.
The Hon’ble High Court went through all the questions framed by the Tribunal and the discussion and conclusions on question as recorded by the Income Tax Appellate Tribunal. The Tribunal had observed that the nature of the evidence or information gathered during the search should be of such nature that it should not merely raise doubt or suspicion but should be of such nature which would prima facie show that the real and true nature of transaction between the parties is something different from the one recorded in the books or documents maintained in ordinary course of business.
The ITAT had further observed that in some instances, the information, document or evidence gathered in the course of search, may raise serious doubts or suspicion in relation to transaction reflected in regular books or documents maintained in the ordinary course of
business, then also in such an event the AO is not permitted to straightaway treat such material as ‘incriminating’ in nature unless the AO thereafter brings on record further corroborative material or evidence to transform his suspicion to belief and conclude that the transaction reflected in regular books or documents did not represent the true state of affairs
and rather that can be the starting point of inquiry to un-earth further material or evidence to transform his suspicion to belief and conclude that the transaction reflected in regular books or documents did not represent the true state of affairs. Until these conditions are satisfied, it cannot be held that every seized material or document found in the course of search as incriminating in nature qua the assessee justifying the additions in unabated assessments. In other words, any and every seized material, which comes in AO’s possession cannot be construed as ‘incriminating material’ straightaway. For instance, scribbling or rough notings found on loose papers cannot be straightaway classified as ‘incriminating material’ unless the AO establishes nexus or connect of such notings with unearthing of undisclosed income of the assessee. This nexus or connect has to be brought out in explicit terms with corroborative material or evidence which any prudent man properly instructed in law must be able to understand or correlate so as to justify the AO’s inference of undisclosed income from such seized incriminating material. This exercise is therefore found to be essentially a question of fact.
The Hon’ble High Court noted that the ITAT concurred with the findings of the Commissioner of Income Tax (Appeals), which had concluded that this document was not an incriminating material and simply contained a shareholding pattern of the assessee which was duly verifiable from the books of accounts and other secretarial records filed by the assessee with ROC prior to the date of search.
The Hon’ble High Court opined that the issue whether a document, which in the instant cases was the electronic device in the form of a hard drive extracted from the computer of the assessee during search constitutes incriminating material or not, would unquestionably require evaluation, assessment and appreciation of contents of such document which is an exercise of evaluation of evidentiary worth of the document.
In view of the above, the Hon’ble High Court opined that there is no doubt that the conclusions recorded on the nature of contents of the document by the competent forum, be it the CIT(A) or the ITAT as to whether the same was incriminating or not, would definitely be findings of fact and hence, the proposed substantial question of law which is the primary ground for assailing the judgment passed by the ITAT cannot be considered to be a substantial question of law.
The Hon’ble High Court opined that it cannot constitute a substantial question of law and rather poses a simple issue of facts which too stand concluded against the revenue by 2(two) competent forums, i.e. the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal who after threadbare discussion and appreciation of the contents of hard drive, the projected incriminating material, have recorded concurrent findings of fact that the same does not constitute incriminating material so as to justify the re- opening of the assessment by virtue of Sections 153A of the Income Tax Act for the unabated/completed assessments.
Accordingly, the appeals were dismissed as being devoid of merit.
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